Investment Rating - The investment rating for Tencent Holdings is "Buy" (maintained) [1] Core Views - The report highlights that the new gaming cycle and the commercialization of the WeChat ecosystem are expected to continue driving growth. The integration of AI models like DeepSeek into WeChat is anticipated to enhance user experience and open up new monetization avenues [4][6] - The company is projected to achieve net profits of 193 billion, 217 billion, and 236 billion CNY for the years 2024, 2025, and 2026 respectively, with corresponding EPS of 21.0, 23.6, and 25.7 CNY. The current stock price corresponds to PE ratios of 21.9, 19.5, and 17.9 for the same years [4][7] Financial Summary and Valuation Metrics - Revenue for 2022 was 554,552 million CNY, with a projected increase to 659,038 million CNY in 2024, reflecting a year-over-year growth of 8.2% [7] - Net profit for 2022 was 188,243 million CNY, with a significant recovery expected in 2024 to 192,984 million CNY, representing a year-over-year growth of 67.5% [7] - Gross margin is expected to improve from 48.1% in 2023 to 54.4% by 2026, indicating enhanced profitability [7] - The report notes that the WeChat ecosystem's monetization efficiency is continuously improving, with the GMV of WeChat small stores expected to be 1.92 times that of 2023 by the end of 2024 [6]

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Core Viewpoint - Jinxin Technology Holding Company has announced a strategic partnership with Tencent Cloud and Sichuan Education Press to develop AI learning solutions for K-12 students, highlighting a commitment to digital transformation in education and advancements in AI technology for K-12 learning products [1][7]. Company Overview - Jinxin Technology is an innovative provider of digital-content products and services in China, focusing on K-9 students and utilizing advanced AI/AR/digital human technologies to enhance educational content [2][8]. - The company has established itself as a leading domestic intelligent education content provider, developing rich digital self-learning content and extracurricular materials to improve students' learning efficiency and competencies [2][8]. Partnership Details - The collaboration aims to create large-scale AI learning solutions tailored to the needs of K-12 students, offering personalized learning services through AI technology [5][6]. - Huixue AI Cloud will serve as the platform for this partnership, set to launch in July 2025, integrating resources from all three parties to deliver AI-driven digital content to K-12 schools in China [6]. Industry Context - This partnership is viewed as an innovative case of AI-convergent publishing, leveraging the strengths of each party to address the evolving needs of the education sector [7]. - The collaboration is expected to provide new development opportunities in the K-12 education field, capitalizing on the ongoing advancements in AI technology [7].

Investment Rating - The report does not explicitly state an investment rating for Tencent Holdings [1]. Core Insights - Tencent Cloud has launched the DeepSeek model API, enhancing its competitiveness in AI and cloud computing by providing high-performance services and simplifying development processes [2]. - WeChat's Spring Festival data shows strong demand for digital red envelopes, indicating the growing penetration of WeChat e-commerce in less saturated markets [3]. - WeChat Pay has seen significant growth during the Spring Festival, particularly in cross-border payments, with a 134% year-on-year increase in transaction volume from inbound tourists [4]. - Tencent has announced a new patent for a large language model training method, which improves the model's generalization ability and accuracy, benefiting applications requiring high precision [5]. Summary by Sections Cloud Computing - Tencent Cloud has introduced the DeepSeek model API, becoming the first domestic cloud provider to support this feature along with online search capabilities. This move is expected to attract more enterprises and developers due to its optimized performance and simplified development processes [2]. E-commerce - The WeChat team reported a surge in the use of digital red envelopes during the Spring Festival, with notable growth in gift categories such as snacks and books, indicating a unique competitive advantage in less saturated markets [3]. Payment Services - WeChat Pay experienced a robust performance during the Spring Festival, with over 1 billion custom red envelope designs created by users. The service saw a 134% increase in transaction volume from inbound tourists, particularly in regions like Luxembourg [4]. Artificial Intelligence - Tencent's new patent for a large language model introduces a comparative learning mechanism that enhances the model's ability to distinguish between correct and incorrect expressions, which is crucial for applications like intelligent customer service [5].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 430 [4][56]. Core Insights - The company is expected to achieve a revenue of RMB 1681.7 billion in Q4 2024, representing a year-over-year growth of 8.4%. This growth is primarily driven by the gaming and online advertising sectors [1][43]. - The gross margin is projected to be 53.5%, an increase of 3.6 percentage points year-over-year, with a gross profit of RMB 900.2 billion, reflecting a 16.1% increase [1][49]. - The operating profit is forecasted to be RMB 525 billion, a year-over-year increase of 28.7%, with a Non-IFRS net profit of RMB 549.3 billion, also up 28.7% year-over-year [1][49]. Summary by Sections 1. Value-Added Services - The revenue from value-added services is expected to reach RMB 766.1 billion in Q4 2024, a year-over-year increase of 10.9%. Game revenue is projected at RMB 475.3 billion, reflecting a 16.2% growth [1][43]. - Domestic game revenue is anticipated to be RMB 319.4 billion, up 18.3% year-over-year, driven by popular titles like "Honor of Kings" and "Peacekeeper Elite" [12][25]. - New game releases such as "Valorant" and "Dungeon & Fighter: Origin" are expected to contribute to revenue growth in Q4 2024 [13][19]. 2. Social Network - Social network revenue is projected to be RMB 290.9 billion in Q4 2024, a 3.1% increase year-over-year, driven by the growth of WeChat mini-games [1][26]. - The number of monthly active users for mini-games reached 500 million, with daily active users at 100 million, showing a 10% year-over-year growth [26][28]. 3. Marketing Services - The marketing services revenue is expected to be RMB 337.4 billion in Q4 2024, a year-over-year increase of 13.2% [30][34]. - The growth is anticipated to be supported by the recovery of social retail sales and the integration of WeChat's ecosystem for enhanced marketing efficiency [34][35]. 4. Financial Technology and Enterprise Services - Financial technology and enterprise services revenue is projected at RMB 558.4 billion, reflecting a 2.7% year-over-year growth [2][37]. - The improvement is attributed to a slight recovery in commercial payment services and stable cloud service revenues [37][38]. 5. Financial Performance - The company is expected to maintain steady revenue growth, with a projected Non-IFRS net profit of RMB 2,223.2 billion for 2024, reflecting a 41.0% growth year-over-year [58]. - The report highlights the potential for operational leverage to be released as high-margin businesses like video accounts and live e-commerce continue to grow [55][56].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of 430 HKD [4][56]. Core Insights - The company is expected to achieve a revenue of 1681.7 billion RMB in Q4 2024, representing a year-on-year growth of 8.4% driven by strong performance in value-added services, particularly in gaming and online advertising [1][43]. - The gross margin is projected to be 53.5%, an increase of 3.6 percentage points year-on-year, with a gross profit of 900.2 billion RMB, reflecting a 16.1% increase [1][49]. - Operating profit is forecasted at 525 billion RMB, a 28.7% increase year-on-year, with a Non-IFRS net profit of 549.3 billion RMB, also up 28.7% [1][49]. Summary by Sections 1. Value-Added Services - Gaming revenue is expected to reach 766.1 billion RMB in Q4 2024, with a year-on-year growth of 10.9%. Domestic gaming revenue is projected at 319.4 billion RMB, up 18.3% [1][12]. - Key games like "Honor of Kings" and "Peacekeeper Elite" continue to perform well, supported by new game launches such as "Path of Exile 2" and "One Piece: Odyssey" [1][17]. 2. Marketing Services - Online advertising revenue is anticipated to be 337.4 billion RMB, reflecting a year-on-year growth of 13.2%. The growth rate is expected to slow compared to Q3 2024 due to macroeconomic conditions [1][30]. - The integration of WeChat's ecosystem is expected to enhance marketing efficiency and attract more advertisers [1][34]. 3. Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services is projected at 558.4 billion RMB, a year-on-year increase of 2.7%. This growth is attributed to improvements in commercial payment services and stable cloud service revenues [2][37]. - The launch of AI-driven services is expected to enhance the company's offerings in the financial technology sector [2][38]. 4. Financial Performance - The company is expected to maintain a steady revenue growth trajectory, with significant contributions from high-margin businesses such as gaming and WeChat video accounts [1][43]. - The operating leverage is anticipated to continue releasing as the company benefits from its diverse revenue streams [1][48]. 5. Valuation and Investment Recommendations - The report adjusts the Non-IFRS net profit forecasts for 2024-2026 slightly downward, reflecting a robust internet platform amidst a weak macroeconomic recovery [3][56]. - The current price corresponds to a Non-IFRS P/E ratio of 15 for 2024, 13 for 2025, and 12 for 2026, indicating a favorable valuation [3][58].

Group 1 - The author has extensive experience in the tech landscape of China, having moved to Shanghai in 2016 and gained insights into governance issues [1] - The focus of the research is on sectors such as Oil, Gas, Energy, and Metals, indicating a specialization in fundamental analysis [1] - The investment strategy emphasizes a "Margin of Safety" and a "Catalyst" for stock selection, with a portfolio typically containing no more than 10 stocks [1] Group 2 - The author has a beneficial long position in the shares of PROSY, indicating a personal investment interest [2] - The article reflects the author's own opinions and is not influenced by compensation from any company mentioned [2]

Investment Rating - Maintain BUY rating with a target price of HK$525 0, implying a 34 7% upside from the current price of HK$389 80 [1][3] Core Views - Tencent is expected to deliver solid earnings performance in 4Q24, driven by strong games revenue growth and resilient marketing business [1] - Total revenue is forecasted to grow by 8% YoY to RMB167 6bn, with non-IFRS net income growing by 29% YoY to RMB55 2bn in 4Q24 [1] - Long-term growth initiatives like Weixin e-commerce and AI are viewed positively, with management optimistic about Weixin's role in the e-commerce ecosystem and AI as a key growth driver for the marketing business [1][8] Earnings Summary - Revenue is expected to grow from RMB554 6bn in FY22 to RMB755 8bn in FY26, with adjusted net profit increasing from RMB115 6bn in FY22 to RMB257 6bn in FY26 [2] - Adjusted EPS is projected to rise from RMB12 13 in FY22 to RMB26 60 in FY26 [2] - P/E ratio is expected to decline from 55 2x in FY22 to 17 4x in FY26, reflecting improved earnings growth [2] Business Forecasts and Valuation - Revenue forecasts for FY24-26E are largely unchanged, with slight downward revisions of -0 1% to -0 3% [9] - Gross margin is expected to improve from 53 1% in FY24E to 54 4% in FY26E, driven by higher-margin games and marketing businesses [9] - Operating margin is projected to increase from 31 9% in FY24E to 33 7% in FY26E [9] - The SOTP-derived target price of HK$525 0 includes valuations for games (HK$199 9), SNS (HK$29 4), marketing (HK$110 3), fintech (HK$82 5), cloud (HK$22 0), strategic investments (HK$68 4), and net cash (HK$12 7) [10][11][12][13][14] Key Takeaways from NDR - Weixin e-commerce is positioned as a connector in the ecosystem, leveraging third-party services and technology to reduce transaction frictions [8] - AI remains a key growth driver for the marketing business, with Tencent maintaining leadership due to its large user base and use cases [8] - Tencent's inclusion in the US CMC list and removal from the USTR "Notorious Markets List" are seen as positive developments [8] Peer Comparison - Tencent's gaming business is valued at an 18x 2025E PE, in line with global peers like NetEase and Electronic Arts [16] - The marketing business is valued at a 20x 2025E PE, reflecting its resilient ad revenue growth supported by Weixin Video Account and Mini Program [16] - Fintech and cloud businesses are valued at premiums to peers, reflecting Tencent's strong market position and growth potential [16][17] Strategic Investments - Tencent's strategic investments are valued at HK$68 4 per share, with significant stakes in companies like PDD Holdings (14 1%), Sea Ltd (18 2%), and Spotify (8 4%) [19] - A 30% holding company discount is applied to the fair value of equity investments [19]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (700 HK) with a target price of HK$520.00, implying a 37% upside from the current price of HK$380.00 [1][2] Core Views - Tencent is well-positioned for sustained strong performance in 2025, driven by robust growth in its gaming and advertising segments [7] - The company's gaming revenue is expected to grow by 16% YoY in 4Q24 and 8% YoY in 2025, supported by evergreen titles and new releases like *Dungeon & Fighter Mobile* [8] - Advertising revenue is projected to grow 15% YoY in 4Q24 and 2025, with video ads and WeChat Channels gaining market share [9] - Fintech and business services revenue is forecasted to grow 5% YoY in 2025, driven by economic recovery and new tools like WeChat Mini Shops [9] Financial Performance - Tencent's adjusted operating profit margin is expected to expand to 34.7% in 4Q24 and 37.9% in 2025, supported by a shift towards higher-margin businesses [10] - The company's adjusted net profit margin is projected to rise to 30.3% in 4Q24 and 34.1% in 2025 [10] - Revenue is forecasted to grow 9% YoY in 4Q24 and 8% YoY in 2025, with net income reaching RMB 240.9 billion in 2025 [20][21] Gaming Segment - Domestic gaming revenue is expected to grow 16% YoY in 4Q24, driven by strong performance of *Dungeon & Fighter Mobile* and deferred revenue of over RMB 100 billion [8] - International gaming revenue is projected to grow 17% YoY in 4Q24, supported by the release of *Path of Exile 2* and contributions from Supercell's *Brawl Stars* [8] - Tencent's gaming pipeline includes titles like *Honor of Kings World* and *Valorant Mobile*, set for release in 2025 [17] Advertising Segment - Social advertising revenue is expected to grow 16% YoY in 4Q24, while media advertising revenue is forecasted to grow 4% YoY [9] - WeChat Channels and video ads are gaining market share, contributing to the segment's outperformance [9] Valuation - The SOTP valuation for Tencent is HK$5.4 trillion, with the gaming segment valued at HK$1.6 trillion (18x 2025E P/E) and the advertising segment at HK$1.2 trillion (18x 2025E P/E) [23][24] - The target price of HK$520.00 is based on a 19x 2025E P/E multiple [10][23] Peer Comparison - Tencent's 2025E P/E of 14.0x is lower than global gaming peers like EA (17.0x) and Take-Two (21.3x) [25] - The company's 2025E P/S of 4.7x is higher than cloud service peers like Alibaba (1.4x) and Baidu (1.5x) [25]

Investment Rating - Tencent Holdings maintains a "Buy" rating [4] Core Views - The inclusion of Tencent in the 1260H list by the US Department of Defense has limited direct impact on the company's operations [2] - The 1260H list does not authorize any direct restrictions on the listed companies, but indirect effects in financing and supply chain areas should be monitored [2] - There is a possibility that Tencent could be added to the NS-CMIC list, which would restrict US entities from trading its securities [3] - Tencent may face supply chain challenges due to potential classification as a "military end-user" under US export control regulations [3] - Historical precedents suggest that Tencent could potentially be removed from the 1260H list through appeals, as seen with Xiaomi in 2021 [3] Financial Projections and Valuation - Revenue is projected to grow from CNY 609,015 million in 2023 to CNY 795,437 million in 2026, with a CAGR of 9.24% [6] - Net profit attributable to the parent company is expected to increase from CNY 115,216 million in 2023 to CNY 216,284 million in 2026, with a CAGR of 23.45% [6] - Earnings per share (EPS) are forecasted to rise from CNY 12.19 in 2023 to CNY 23.45 in 2026 [6] - The P/E ratio is expected to decline from 22.65x in 2023 to 16.41x in 2026, indicating improving valuation metrics [6] Financial Ratios and Performance - Gross margin is projected to improve from 48.13% in 2023 to 55.18% in 2026 [12] - Return on Equity (ROE) is expected to increase from 14.25% in 2023 to 17.78% in 2024, before slightly declining to 16.33% in 2026 [12] - The debt-to-asset ratio is forecasted to decrease from 44.61% in 2023 to 38.12% in 2026, reflecting a stronger balance sheet [12] - The current ratio is expected to improve from 1.47 in 2023 to 2.43 in 2026, indicating better liquidity [12] Market and Industry Context - Tencent's stock price closed at HKD 409.40, with a 12-month price range of HKD 257.97 to HKD 482.40 [7] - The company's market capitalization stands at HKD 3,724.8 billion [7] - Tencent's performance is compared to the Hang Seng Tech Index, with a recent underperformance of -17.00% [9]